Pennon Group Plc Announces Heavily Discounted £490.9 Million Rights Issue
Why we think this is very bad
The significantly discounted 43.9% rights issue at 264 pence per share, compared to the previous closing price of 470.80 pence, is a very negative sign indicating low investor appetite and potentially a last resort funding measure for Pennon Group. The large £490.9 million raise size relative to the company's £2.25 billion market cap suggests the company may be facing significant funding needs. This high discount and large raise size are likely to be viewed negatively by the market and could lead to a decline in the share price. While the funds will strengthen the balance sheet, the dilution to existing shareholders and potential ongoing funding risks are concerning. The mixed broker targets, with some reducing price targets, further suggest caution about the company's outlook following the rights issue.
Key Points
- Pennon Group Plc announces £490.9 million rights issue at 264 pence per share
- Rights issue price represents a 43.9% discount to the previous closing price of 470.80 pence
- Company received valid acceptances for 172,143,766 new shares, representing 92.586% of the total
- Remaining 13,729,631 new shares to be placed by the underwriters
- Large raise size of £490.9 million relative to £2.25 billion market cap suggests significant funding needs
Summary
Pennon Group Plc, a leading UK water and wastewater services provider, has announced the results of a 13 for 20 rights issue of 185,928,002 new ordinary shares at 264 pence per share. The company received valid acceptances for 172,143,766 new shares, representing approximately 92.586% of the total. The remaining 13,729,631 new shares not taken up by qualifying shareholders will be placed by the underwriters. The rights issue price of 264 pence represents a 43.9% discount to the previous closing price of 470.80 pence, indicating low investor appetite and potentially a last resort funding measure for the company.